Certified Translation for Bank Secrecy Cases
There is an ongoing need for certified translation services for bank secrecy law cases. In Jarnagin v. United States of America, the plaintiffs, a husband and wife, filed a lawsuit against the IRS alleging that the IRS wrongfully assessed and collected penalties from them for four years in a row. The IRS pursued penalties against the plaintiffs because the plaintiffs failed to file reports regarding their foreign bank account per the Bank Secrecy Act.
Plaintiffs Had Dual Citizenship/Residency Status
The husband was a dual U.S-Canadian citizen and his wife was a U.S. citizen with Canadian residency status. Many people believe it is illegal to have dual citizenship with the United States and another country. However, this is not the case. According to the U.S. State Department’s website, “U.S. law does not mention dual nationality or require a person to choose one nationality or another. A U.S. citizen may naturalize in a foreign state without any risk to his or her U.S. citizenship…. Dual nationals owe allegiance to both the United States and the foreign country. They are required to obey the laws of both countries, and either country has the right to enforce its laws.”
In additional to their dual citizenship/residency status, the plaintiffs were also experienced business owners. Plaintiffs were involved in buying/selling farms and leasing mineral rights in Canada. The plaintiffs also owned apartment complexes and even a nightclub in the United States.
Background on The Bank Secrecy Act
Congress enacted the Bank Secrecy Act (BSA) in 1970 to address concerns regarding “the use by American residents of foreign financial facilities located in jurisdictions with various types of secrecy laws.” H.R. Rep. No 91-075 (1970). In order to reduce the ability of Americans to violate American law through banking activities in foreign jurisdictions, Congress imposed a requirement on residents and citizens to keep records and make reports regarding their foreign accounts and transactions.
IRS Imposes Penalties Against Plaintiffs
In 2012, the IRS sent letters to the plaintiffs informing them that the IRS was proposing a penalty against them for violating the record keeping requirement regarding their Canadian bank account. The IRS proposed a penalty of $100,000 or $10,000 for each year the plaintiffs failed to file their “Report of Foreign Bank and Financial Accounts” or FBAR. The plaintiffs disputed these penalties and the IRS agreed to withdraw its proposed penalty for one of the years, but the IRS still demanded $40,000 in fines from each plaintiff for the remaining years. The plaintiffs paid the penalties in 2015 but then sought a refund, which the IRS denied.
Nature of Plaintiffs’ Claims
While the plaintiff did not dispute that they owned a Canadian bank account through the Canadian Imperial Bank of Commerce during the relevant time period and did not dispute that they were required to file certain reports with the IRS, the plaintiffs claimed that their failure to file the requisite reports with the IRS was due to reasonable cause. The plaintiffs also claimed that the IRS wrongfully failed to provide them with a refund. The plaintiffs argued that they had hired various CPAs to prepare their U.S. tax returns and that they expected that these accountants would have known of their Canadian bank account.
The plaintiffs claimed that they “turned everything over” to the accountants and had very little involvement in the preparation of their tax returns. The plaintiffs claimed that, although they signed declarations stating that they had reviewed their tax returns before filing them, they had not actually done so and did not ask their accountants any questions about the returns.
Court Rejects the Plaintiffs’ Request for Reimbursement
The court rejected the plaintiffs’ claims for reimbursement, finding that they had not established reasonable cause for failing to comply with the reporting requirement. As such, the court held that the plaintiff did not qualify for a reimbursement of the sums paid to the IRS as a penalty.
The court found that the husband had a particular obligation, given his dual citizenship and business activities in Canada, to comply with the reporting requirement. The court held that the mere fact that the plaintiffs’ tax returns were prepared by tax professionals did not absolve them of their responsibility to file the FBARs. The court held that the plaintiffs could not “use as a shield reliance upon advice that they neither solicited nor received.” The court reasoned that had the plaintiff read the text of the statute, that they would have realized the magnitude of their mistake in answering “no” to the question of whether they maintained any foreign accounts.
The court also considered the plaintiffs’ experience in maintaining several businesses and determined that the plaintiffs had failed to exercise “ordinary business care and prudence.” Accordingly, the court granted summary judgment in favor of the United States and against the plaintiffs.
The case is Larry D. Jarnagin and Linda Jarnagin v. The United States of America, Court No. 15-1534T decided on November 30, 2017 in the United States Court of Federal Claims.
Contact All Language Alliance, Inc. to obtain certified translation of corporate documents from French, Spanish, Russian, Swedish, German, Dutch, Hebrew, and Asian languages to English for tax litigation.
***This legal translation blog article should not be construed as legal advice. You should always consult an attorney regarding your specific legal needs.***
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